New York Markets After Hours

U.S. restaurants look to overcome weak traffic

DebbieCai

TAKING THE PULSE: Efforts to manage commodity costs by raising menu prices without deterring customer traffic could pay off in the third quarter for U.S. restaurant companies. They are expected to record a combined same-store sales increase of 2.8%. Starbucks Corp.
SBUX, -1.33%
McDonald's Corp.
MCD, -0.45%
and Yum Brands Inc.
YUM, -0.87%
are continuing investments in their overseas businesses to maintain profit margins amid concerns around sluggish domestic growth, while Brinker International Inc.
EAT, +1.17%
is relying on menu and in-store improvements to boost sales.

Street projections show both profit and revenue growth for Yum Brands, Starbucks, Brinker and Chipotle Mexican Grill Inc.
CMG, -0.74%
while profit is likely to be flat for fast-food leader McDonald's.

COMPANIES TO WATCH: Yum Brands - Oct. 10

Wall Street Expectations: Analysts surveyed by Thomson Reuters predict an adjusted profit of 97 cents a share on revenue of $3.64 billion. A year ago, Yum posted income of 80 cents, or 83 cents excluding some items, on revenue of $3.27 billion.

Key Issues: The parent company of Taco Bell, KFC and Pizza Hut expects its China and Yum Restaurants International businesses to drive its profit growth in the second half as its Pizza Hut and KFC chains are booming in urban areas. However, China generated just 37% of Yum's total operating profit in the second quarter as rising food costs and wage inflation squeezed Yum's profit margins in the country. China typically contributes half of Yum's total profits.

Chipotle Mexican Grill - Oct. 18

Wall Street Expectations: The company is expected to report earnings of $2.30 a share and revenue of $704 million. Last year, Chipotle's results were $1.90 a share and $591.9 million, respectively.

Key Issues: The burrito chain has seen its stock decline since April amid decelerating sales and slower customer traffic growth, while its second-quarter revenue growth and same-store sales missed expectations as the slowdown continued. Despite the share declines, hedge fund manager David Einhorn said this week that Chipotle has a "nosebleed valuation," and its customers would prefer rival Taco Bell's new burritos and burrito bowls. His comments further pressured the stock, putting its declines at more than 20% over the past three months.

Wall Street Expectations: Analysts expect a profit of $1.48 a share on revenue of $7.17 billion. A year earlier, earnings were $1.45 a share and $7.17 billion, respectively.

Key Issues: Throughout the recession, the burger chain was able to boost guest traffic and sales faster than most competitors with its expanding global operations and diverse menu. However, McDonald's has seen sales growth pressured this year by austerity measures in Europe, U.S. competition and a slowdown in China's economy.

Wall Street Expectations: Analysts forecast income of 38 cents a share on revenue of $683 million. The company reported a profit of 28 cents a share, or an adjusted 30 cents, on revenue of $668.4 million a year earlier.

Key Issues: Brinker, which is in the midst of a multiyear effort to revamp its Chili's Grill & Bar chain, has reported higher customer numbers and same-store sales growth for more than a year. Despite facing headwinds like rising commodities costs, Brinker has decreased labor costs and increased kitchen efficiency, and changed Chili's menu to offer value without damping margins. In August, the company projected full-year earnings above analysts' estimates.

Wall Street Expectations: Analysts expect earnings of 45 cents a share on revenue of $3.38 billion. A year ago, Starbucks posted a profit of 47 cents a share, or 37 cents a share excluding nonroutine gains and restructuring impacts, on revenue of $3.03 billion.

Key Issues: Starbucks has in recent months seen softness in customer traffic, although sales growth at its established U.S. cafes remains higher than most of its peers. It continues to build beyond its core U.S. cafe business while being upbeat about its global business. The restaurant's growth projections include energy drinks and expansion plans in China. The company recently acquired La Boulange Bakery for $100 million.

(The Thomson Reuters financial estimates and year-earlier figures may not be comparable due to one-time items and other adjustments.)

Intraday Data provided by SIX Financial Information and subject to terms of use.
Historical and current end-of-day data provided by SIX Financial Information. Intraday data
delayed per exchange requirements. S&P/Dow Jones Indices (SM) from Dow Jones & Company, Inc.
All quotes are in local exchange time. Real time last sale data provided by NASDAQ. More
information on NASDAQ traded symbols and their current financial status. Intraday
data delayed 15 minutes for Nasdaq, and 20 minutes for other exchanges. S&P/Dow Jones Indices (SM)
from Dow Jones & Company, Inc. SEHK intraday data is provided by SIX Financial Information and is
at least 60-minutes delayed. All quotes are in local exchange time.